Is China Too Big to Fail?

Is China Too Big to Fail?

The financial crisis that still plagues the world has taught that banks deemed too big to fail may also be too big and complex to manage efficiently. Consider the London office of JPMorgan Chase that ran up a $6 billion loss when no one at headquarters was watching closely or enforcing its own rules.

 

Something similar may apply to China. Its huge economy won’t fail even though it clearly is slowing down to an unknown pace. But as Chinese society becomes more modern, complicated and troubled, Beijing’s leaders are finding it increasingly difficult to govern effectively—at least by the ruling system they have in place. Despite insistent warnings from inside the country that failure to reform may lead to a national crisis, so far they resist making needed changes that might also put at risk their own great power and privileges.

 

A test will come next month when, two days after the U.S. election, the ruling Communist Party begins once-per-decade leadership changes at the party’s eighteenth national congress. (Similar government revisions will follow early next year.) The 2,270 carefully selected delegates—including twenty-six migrant workers, a twenty-one-year-old Olympic swimming champion and a ninety-seven-year-old former Beijing mayor—will follow the official script to name a new ruling-party politburo and, more importantly, the smaller standing committee that makes all crucial policy decisions for China’s opaque system. Fourteen of the twenty-five current politburo members are expected to retire; seven of them also belong to its nine-man standing committee. The outgoing members include president and party chairman Hu Jintao and Premier Wen Jiabao (there are no women at the top).

 

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